In traditional commerce, a marketplace is a physical place you visit in order to transact. For example, television and radio typically motivate the consumer to go some- place to make a purchase. E-commerce, in contrast, is characterized by its ubiquity: it is available just about everywhere, at all times. It liberates the market from being restricted to a physical space and makes it possible to shop from your desktop, at home, at work, or even from your car, using
mobile commerce. The result is called a market-space a marketplace extended beyond traditional boundaries and removed from a temporal and geographic location. From a consumer point of view, ubiquity reduces transaction costs—the costs of participating in a market. It is no longer necessary that you spend time and money traveling to a market. At a broader level, the ubiquity of e-commerce lowers the cognitive energy required to transact in a market space. Cognitive energy refers to the mental effort required to complete a task. Humans generally seek to reduce cognitive energy outlays.
E-commerce technology permits commercial transactions to cross cultural and national boundaries far more conveniently and cost-effectively than is true in traditional commerce. The total number of users or customers an e-commerce business can obtain is a measure of its reach.
In contrast, most traditional commerce is local or regional—it involves local merchants or national merchants with local outlets. Television and radio stations, and newspapers, for instance, are primarily local and regional institutions with limited but powerful national networks that can attract a national audience. In contrast to e-commerce technology, these older commerce technologies do not easily cross national boundaries to a global audience.
The Internet and the Web vastly increase information density—the total amount and quality of information available to all market participants, consumers, and merchants alike. E-commerce technologies reduce information collection, storage, processing, and communication costs. At the same time, these technologies increase greatly the currency, accuracy, and timeliness of information—making information more useful and important than ever. As a result, information becomes more plentiful, less expensive, and of higher quality. A number of business consequences result from the growth in information density. In e-commerce markets, prices and costs become more transparent. Price transparency refers to the ease with which consumers can find out the variety of prices in a market; cost transparency refers to the ability of consumers to discover the actual costs merchants pay. But there are advantages for merchants as well. Online merchants can discover much more about consumers; this allows merchants to segment the market into groups willing to pay different prices and permits them to engage in price discrimination—selling the same goods, or nearly the same goods, to different targeted groups at different prices. For instance, an online merchant can discover a consumer‘s avid interest in expensive exotic vacations, and then pitch expensive exotic vacation plans to that consumer at a premium price, knowing this person is willing to pay extra for such a vacation. At the same time, the online merchant can pitch the same vacation plan at a lower price to more price-sensitive consumers (Shapiro and Varian, 1999). Merchants also have enhanced abilities to differentiate their products in terms of cost, brand, and quality.